Amazon to Collect Sales Tax in Massachusetts

Massachusetts residents will have a little less than a year to continue enjoying shopping tax-free on Amazon.com, thanks to a recent agreement between Beacon Hill and the multinational online retailer.

“We are thankful Amazon was willing to come to the table and we will continue our conversations with them about creating jobs here,” said Governor Deval Patrick, whose administration was feeling ongoing pressure from unions and local retailers’ associations to require the tax collection. “This agreement is a win for all sides, and I am pleased it promises to generate millions in long-term revenue for the Commonwealth.”

According to one such association, the Massachusetts Main Street Fairness Coalition, Massachusetts lost some $387 million in revenues in 2011 thanks to residents doing their shopping online, an environment that has to date only been taxed and regulated in a handful of states. Under federal law, a retailer must collect sales tax if it has a “physical presence” in the state. While Amazon—a Seattle-based company—has continued to expand both its inventory and its presence in every region of the country, it was not until this year that the Patrick administration identified its purchase of the North Reading-based tech firm Kiva Systems as grounds for requiring the collection of state sales tax. The agreement follows a similar one that the company negotiated in May with the state of New Jersey.

Amazon has agreed to collect the 6.25 percent tax, which it will begin doing on Nov. 1, 2013. However, vice president for global publicity Paul Misener expressed the company’s opinion that the issue of taxation of online sales ultimately needs to be addressed at the federal level, calling federal legislation “the only way to level the playing field for all sellers, the only way for states to obtain more than a fraction of the sales tax revenue that is already owed, and the only way to fully protect states’ rights.” The need for such national standardization was echoed in a letter written earlier this year by Massachusetts Treasurer Steven Grossman to the head of the U.S. Senate’s Finance Committee, Senator Max Baucus, in which Grossman emphasized the issue of an ongoing inequity with respect to “Main Street businesses.”

Not surprisingly, much of the pressure on state governments to tax online retail transactions has come from local merchants’ associations and chambers of commerce, who have long argued that giant online retailers have an unfair advantage over brick-and-mortar establishments, which are often small, independent “mom and pop” operations. But even some global big-box chain stores—like the beleaguered Best Buy—can also point to Amazon’s competitive advantage as a large factor in their own decline. In addition, advocates for government programs whose recently slashed funding might see some partial restoration as a result of the increased revenue have expressed support for what many feel is a long-overdue measure.

Most Massachusetts residents seem to regard the measure as “fair,” though no one seems particularly excited about paying more taxes, either.

Amazon apparently harbors no ill will toward the Commonwealth, and said in a statement to the governor’s office that it “look[s] forward to creating hundreds of high tech jobs in Massachusetts,” a statement that seems to suggest plans to expand the company’s physical presence in the state. The optimistic words appear to be backed up by the fact that the company is actively recruiting engineers for a new Cambridge-based office it plans to open in the next year.•